Nigeria and other African nations can tap up to $4 trillion in capital from institutional investors, an amount that could be used to fund the continent’s infrastructural gaps and engineer much-needed economic growth, according to the Africa Finance Corporation.
While there are as investable domestic capital across banking assets, institutional funds, and reserves, the multilateral lender revealed on Thursday that funds are still being channeled into “low-risk and short-term instruments instead of being channelled into the real economy.”
“Redirecting more savings into the real economy is critical,” said Rita Babihuga-Nsanze, AFC chief economist and director of strategy, speaking during the AFC’s 2025 State of Africa’s Infrastructure briefing. “Africa must build its intermediation infrastructure to match its development needs.”
Nigeria is however demonstrating how Africa can unlock domestic capital for infrastructure, with its pension fund investments in the sector rising from just $6 million in 2015 to more than $155 million in less than a decade.
This milestone, driven largely by reforms and credit enhancement mechanisms like InfraCredit, underscores the growing role of pensions in financing long-term development on the continent.
Data from the Africa Finance Corporation (AFC) shows that as of February 2025, Nigeria’s infrastructure-related pension assets had grown to N250.87 billion, representing 1 percent of total assets under management (AUM).
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This is a sharp increase from the N1.19 billion recorded in 2015, which stood at just 0.02 percent of AUM.
A turning point came in 2017, with the launch of InfraCredit and Nigeria’s maiden corporate infrastructure bond. The credit guarantee initiative helped de-risk infrastructure projects, attracting conservative institutional investors like pension fund administrators (PFAs).
Chinua Azubike, managing director of InfraCredit said the credit-guarantee institution has helped facilitated bonds to build critical infrastructure, citing the bond raised for the construction of the Lagos Free Zone.
Azubike noted that while perception of risks persists, the company has “zero default rate” despite being involved in well over 12 sectors.
But while Nigeria’s growth is notable, pension allocations across Africa remain largely skewed toward low-risk, short-term instruments such as government securities and money market funds.
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In countries like Ghana and Uganda, over 75 percent of pension assets are held in government bonds. Nigeria itself still holds 63 percent of its pension assets in these instruments.
This conservative stance, analysts say, reflects both regulatory caution and the underdevelopment of local capital markets.
In contrast, economies like India and OECD countries show a more balanced allocation, with significant exposure to corporate debt, real estate, and alternative investments. For example, OECD pension funds allocate nearly 20 percent to alternatives, according to AFC data.
To replicate Nigeria’s model, experts are calling for a coordinated effort to deepen capital markets, build risk assessment capacity, and create vehicles that can intermediate long-term finance effectively.
Beyond returns, pension investments in infrastructure have the added benefit of creating jobs, boosting productivity, and supporting economic resilience, critical needs in a post-pandemic, climate-vulnerable Africa.
